Ever since the idea of debit swipe fee
reform came to the fore, the banking industry has been peddling doomsday
scenarios about how lower caps would negatively impact consumers. It would, they argued; mark the end of free
checking accounts. But a new comprehensive report just released by the Kansas City Federal Reserve
has punctured that claim, exposing it as nothing more than a bogus and idle threat.
According
to the report, which looked at checking fees before and after debit reforms
were put in place, free checking actually became more available
post-regulation. In fact, the share of
small banks offering free checking rose from 37 percent to 44 percent from 2011
to 2012.
What’s
even more compelling is that the study proves what many advocates of swipe fee
reform have been claiming from the very beginning: competition in the marketplace benefits
consumers. As the report notes, “free
checking has expanded most in cities and regions where banks are engaged in
vigorous competition: banks in such markets may offer free checking to attract
customers from other banks or to ensure retention of their own established
customers.”
It’s
time now to use this evidence as the basis for curbing the escalating costs of
credit card swipe fees, which have tripled in the last decade for no
discernable reason since advances in technology should have driven down the
processing costs to banks. No good can
come from continuing to allow Visa and MasterCard to control 80% of the market. This status quo stymies competition in the
marketplace, which only ends up hurting both consumers and merchants.
There’s
little doubt that the banks and credit card companies will continue to use
consumers as their straw man in order to protect the windfall of profit they
rein in from swipe fees. But the facts,
as seen in the Kansas City Fed’s report, have exposed their line of reasoning
as nothing more than a pack of lies.
They should not fool us any longer.
